Indian stock market plummets on IPO scam order Mumbai |
India's key share market plunged over four percent in the early trade Friday, a day after the regulator cracked down on some of the top brokerage firms for allegedly manipulating initial public offerings (IPOs).
The key share market index, which has risen sharply higher in the last few months, sank over four percent within few minutes of the start of the trade, registering its biggest intra-day fall since May 18, 2004. The market, however, managed to recover a better part of its losses in the intra-day trade as investors rushed to pick up heavyweight equities at sharply lower levels. At around noon, the stock market barometer 30-share Bombay Stock Exchange sensitive index or Sensex was quoting at 11,697.46, a loss of 137.56 points or 1.16 percent from its previous session's close.
"A knee-jerk reaction was expected after the major order against the brokerage firms that came out last evening," said K.K. Mittal, vice president of New Delhi-headquartered Escorts Mutual Fund. "There is some ambiguity about the order and, therefore, retail investors are rushing to wind up their positions. The panic selling is not likely to continue for long and the market is expected to stabilise soon," Mittal told IANS. The Securities and Exchange Board of India (SEBI), the capital market watchdog, Thursday cracked down on some of the top brokerage firms and banks for alleged involvement in an initial public offering scam. SEBI conducted investigations in respect of all the initial public offerings during the period from January 2003 to December 2005. The findings of investigations, prima facie, revealed violations of serious nature by the key operators, their financiers, concerned depository participants and the depositories. In its order, SEBI has barred brokerage firms like Karvy Stockbroking and Indiabulls from the market. It has also directed HDFC Bank and IDBI Bank not to open new demat accounts for share transactions. SEBI said certain entities had cornered shares reserved for retail applicants in the name of fictitious entities in the initial public offerings of Yes Bank and Infrastructure Development Finance Company. Each of the fictitious application was of small value so as to be eligible for allotment under retail category, it added. After the allotment, these fictitious beneficiaries transferred these shares to their principals who in turn transferred the shares to their financiers.
"There were some irregularities in the market. SEBI has done the right thing by correcting the irregularities in the interest of millions of retail investors," said Mittal. Massive investments inflows in Asia's second fastest growing economy after neighbouring China on hopes of sustained higher economic growth was helping the index to scale new peaks almost on a regular basis. The booming Indian stock market achieved a milestone Thursday with the key index crossing the magical 12,000-mark for the first time in the history of the capital market on massive institutional buying. The historical level was reached in 19 days after shares went past the 11,000-barrier on March 21. The index has risen over 90 percent from its level in a year-ago period. Foreign institutional funds, the backbone of India's liquidity starved capital market, pumped in a record $10.7 billion in the stock market in 2005 and have already bought shares worth over $4 billion in the current calendar year. Enthused by the surging equity valuations, the overseas funds have invested a whopping $1.5 million in March, compared with February's $1.7 billion, showed SEBI figures.
(IANS) edited by http://www.sharetipsinfo.com team Click here for Indian stock market tips